To Kill a Neighborhood: Rezoning in Brooklyn’s ‘Final Frontier’

by Joseph Grosso / June 1st, 2016

On April 20th New York’s City Council overwhelming and unsurprisingly approved Mayor de Blasio’s controversial plan for the rezoning of the Brooklyn neighborhood East New York. The final tally was 45-1-0. Unsurprisingly since a month earlier the council had already approved de Blasio’s $41 billion housing plan that aims to create and preserve (a distinction that shouldn’t be glossed over) 200,000 units of affordable housing over the next decade.

De Blasio’s housing plan, classified under the banner of ‘mandatory inclusionary housing’, targets 15 neighborhoods beginning with East New York, proposes changes in local zoning that would allow developers the right to build bigger buildings in exchange for a certain percentage of units reserved as affordable. Under the plan as originally proposed the council would have three options for each particular rezoning: 25 percent of new apartments to rent for an average of about $1165 a month for people making 60 percent of the metropolitan area’s median income (AMI), about $36,000 for an individual and $51,780 for a family of four; 30 percent renting for an average of $1580 for people making 80 percent of AMI, about $62,000 for a family of three; 30 percent for households at 120 percent of AMI renting at a higher $2300- this option for so called ‘emerging markets’; i.e., neighborhoods already gentrifying.

Upon passing the overall plan in March the council added a fourth option, the one that will apply to East New York: 20 percent of units at 40 percent of AMI, or roughly $31,000 a year and a lowering of the affordability cap from 120 to 115 percent of AMI. The mayor also agreed, at the urging of activists, to conduct a study of the neighborhoods slated for rezoning. At least before that revision the housing plan was rejected by four of the five borough presidents and 50 of 59 community boards.

Perhaps it is equally unsurprising that the plan has received the endorsement of the New York Times. In a recent op-ed that was titled ‘Saving a New York Neighborhood From Gentrification’, the Times basically brought City Hall’s line, while acknowledging that it is ‘paradoxical’, ‘that gentrification is coming anyway, that people are already proclaiming East New York as the next Williamsburg. Without a strict zoning plan, East New York will not be spared’.

Of course, it is not at all difficult to posit obvious objections to such sentiments. Even given the percentage of apartments labeled affordable, how exactly would thousands of what passes for market rate units in the city these days limit gentrification in the greater neighborhood (overall the plan calls for just over 6000 new apartments by 2030)? Such a system, given local changes that figure to result, may well accelerate it. And there is the question of AMI. The metropolitan area’s median calculation includes higher income areas in Long Island and Westchester that bring the median into the upper half of the city’s median. In the case of East New York 53 percent of the neighborhood’s residents make less than $35,000 a year but would seem to only receive 13 percent of the planned housing while more than half would go to the 14% of residents making $75,000.

The administration claims that 40 percent of the affordable units will go to incomes between $23,000-38,000. Even taking the reforms issued by the City Council, which also include a plan for an expedited 1300 affordable units over the next few years and scaling back of proposed industrial zoning changes, there is still plenty of room for high-end development- a fact that the market has recognized with fast rising land prices in the neighborhood. Brother Paul Mohammad of the Coalition for Community Advancement succinctly declared (quoted in The Gothamist) “the first plan was arsenic and this one is just a watered down version of the poison.”

The administration claims it can alleviate the AMI issue by further subsidizing developers on individual projects within the general housing plan. The extreme inefficiency of this approach can be clearly seen in the case of Stuyvesant Town, the massive apartment complex on the East Side. Built in 1947 by Metropolitan Life, then the largest corporation in the country, in conjunction with the city (thousands of working class tenements were cleared from the site though by most accounts there were no large protests and the area’s population had dropped in the years prior to the clearing), Stuy Town for decades was held as a paragon of middle class housing in the city (many of its original white only inhabitants were veterans just returned from World War II).

For decades its rent stabilized, 11,232 apartments were a solid investment for Met Life, reporting a Net Operating income of $112 million in 2006. However, with Met Life becoming a publically traded company in the mid-2000s shareholders demanded more. The waiting list for affordable apartments was closed and regulations began to be lifted. In 2006 came the disastrous $5.4 billion sale to Tishman Speyer and Blackrock Realty. The sale was financed almost entirely with leveraged debt, debt that was quickly securitized and sold to other investors.

The immediate problem was rental income from Stuy Town only covered about 40% of the debt load. This led to the requisite squeezing and harassment of tenants. In October 2009 the New York State Court of Appeals ruled that Tishman Speyer and Met life wrongly deregulated 4440 apartments and ordered compensation. The group defaulted on $4.4 billion in loans in January 2010 (though the main hit was taken by Fannie Mae and Mac- $2 billion, along with other investors including the Church of England and government of Singapore).

In October of last year the complex was sold to the Blackstone Group, the country’s largest landlord, a sale helped along by the de Blasio administration. By now half of the complex’s units have been deregulated commanding $4200 a month for two bedrooms on the open market. The deal with Blackstone guarantees a more affordable rate for the other half for twenty years. Besides owning a gigantic piece of Manhattan real estate what does Blackstone get in exchange for this bit of philanthropy? $221 million in city funding- $77 million in tax breaks and a 20 year $144 million self-amortizing loan structured to basically function as another city subsidy, and, even more significant, city support for transferring Stuy Town’s unused air rights to properties elsewhere in the city.

Air rights refer to empty space above a building. If, for example, a neighborhood is zoned for a limit of 35 stories and a building stands at five stories the leftover potential space can be sold to another owner enabling that owner to build a taller property. Normally the properties selling air rights must be adjacent. An owner needs to buy the air rights of a next door neighbor before buying any others, then the next neighbor’s and so on. The Stuy Town complex, 110 buildings spread out over 80 acres with more than one million square feet of unused air rights, presents quite a bonanza, particularly if the air rights can be applied in other parts of Manhattan.

Extremely valuable air rights and $221 million in extra funding all in exchange for keeping half a complex worth of apartments labeled affordable. Thus the de Blasio administration declared victory. Such is the inevitable result of accepting gentrification as a simple fact of life and relying exclusively on private sector solutions, something the Times certainly didn’t question. Such policies need big developers to be on board and that means fairer proposals, even within the same context, such as a 50-50 split between market rate and affordable housing can be dismissed as not profitable enough and threatening housing production, and where there are developers there are waiver requests, exemptions, and non-enforcement (a hallmark of the Bloomberg years in New York and in other cities are buyouts that allow developers to simply pay a set amount upfront to get out of putting aside any affordable units. De Blasio’s plan seems to at least avoid that). A study published in City Limits last November showed that developers can expect to achieve a yield of 8.7 percent under the first option of the plan.

A cynical chorus may sing that worries about gentrification are needless since surely East New York could use a healthy dose of it. After all even during times of high crime East New York stood out as among the poorest and most violent neighborhoods in the city. Even today it ranks on top in total number of murders (though its murder rate is lower than Ocean Hill and Brownsville, nearby neighborhoods). Like the South Bronx for a long time East New York served as a symbol of urban decay, though unlike the South Bronx its wreckage wasn’t captured for posterity by Howard Cosell during the World Series nor did East New York have the honor of a presidential visit. East New York has until recently been a ghetto even more hidden.

The origins of East New York go back to a Dutch settlement in the late 17th century. The name ‘East New York’ came from Connecticut merchant John Pitkin who arrived in 1835 with ambitions to turn the farming community into a center of urban commerce. Pitkin purchased 135 acres and named his territory East New York to clearly demonstrate the scope of what he had in mind. While the Panic of 1837 would wipe out Pitkin’s plans, though Pitkin Ave remains a prominent thoroughfare, the development of New York’s infrastructure, its subways and trolley lines, and waves of European immigration would gradually populate the area. The 1901 Tenement House Law, requiring fire escapes, access to light, and improved sanitary conditions for new tenements helped to spur many to flee the older tenement districts like the Lower East Side. East New York became a diverse mix of Germans, Italians, Poles, and Jews (the Jewish population became especially significant in next door Brownsville).

If East New York could fairly be described as a solid working class neighborhood up through the mid-1960s, it would soon after fall victim to a toxic brew of poor urban planning, neglect, and racism. Urban planner Walter Thabit opens his book How East New York became a Ghetto with the following:

The Central part of East New York in Brooklyn, home to 100,000 people in 1965, was largely destroyed in the following decade. The destruction accompanied a racial shift in the population, from 85 percent white in 1960 to 80 percent black and Puerto Rican by 1966. During that period, the racially biased policies of real estate brokers and speculators…the redlining of the community by the banks, and almost total neglect of the situation by the city and its agencies brought the area to the brink of collapse.

Blockbusters and real estate hustlers filled the neighborhood provoking white flight, helped along by subsidized suburbanization and white racism, and black residents, denied housing opportunities elsewhere in the city and exploited by the same real estate interests, channeled into a neighborhood that, redlined by banks, immediately faced a shortage of services and a stagnant local economy. As East New York filled with thousands of children, and the Catholic schools that had served the neighborhood’s previous population closed, the Board of Education was unable or unwilling to build a single new school. As Thabit documents, at its worst a third of East New York’s children were getting less than a full day of schooling from the late 1960s to the early 1970s. Isolated public housing (also pronounced in Brownsville) further segregated poverty. The predictable ghetto that resulted from all this was ripe to descend into violence, particularly during the crack epidemic of the late 1980-early 1990s.

Now with the crack epidemic in the past, New York branding itself as ‘the safest big city in the world’, and gentrification, much of it a direct result of city policy, East New York finds itself, along with Brownsville, billed as a sort of final frontier in Brooklyn real estate. As has happened in neighborhoods throughout the city, longtime residents who endured the worst of times and rebuilt their communities now face the prospect of their neighborhoods being sold from under them. Whereas ghettoization once expanded to East New York from neighborhoods such as Bedford Stuyvesant now comes gentrification.

Local businesses, citing fears of rezoning during the Bloomberg years such as the 2005 rezoning of Williamsburg that cost the area half of its manufacturing jobs, fear rising rents will force them out in favor of large chain stores with less of a stake in community investment (again with precedent, see IKEA’s presence in Red Hook). The philosophy of such urban redevelopment, even under the more progressive de Blasio administration, seems to be that economic growth can only come from the importing of wealthier residents to spark a wider demand for local goods and services. That logic is disputed by local activists such as Michelle Neugebauer, executive director of the Cypress Hills Local Development Corporation, who calls East New York ‘an example of a healthy, thriving low-income community’. (City Limits 3/9/16).

Under New York City law communities, through the fifty nine community boards, can submit plans for approval by the City Council. Last summer the Coalition of Community Advancement released an alternative plan that called for lower rents for mom-and-pop shops in new publically funded developments, financial aid for business improvements, tax credits for landlords who maintain established businesses, and demands that the city fill retail spaces businesses that will not pose ‘undue competition’ on local retailers (meaning no large chain stores too close to local alternatives). Yet as noted earlier, while local activists were able to force some reforms, and the same was said about the rezoning in Williamsburg, the broader housing plan remains in place.

A paradox in the history of the city is that, even taking into account the destructive years of Robert Moses, the city has never engaged in widespread planning. The first and only master plan for the city was put forward and defeated in 1969. In lieu of planning the city relies on zoning, all the better to maintain flexibility for the real estate industry and its speculation. At this point in his term it seems safe to say the de Blasio administration will not be altering the trend. A truly fair housing programming will take serious planning, incorporating community controlled land trusts and expanded and improved public housing alternatives. Unfortunately such things appear beyond the pale for the city’s politics keeping the struggle against gentrification an uphill one.